REG - Arbuthnot BankingSecure Trust Bank - Final Results for the year to 31 December 2015 <Origin Href="QuoteRef">ARBB.L</Origin> <Origin Href="QuoteRef">STBS.L</Origin> - Part 7
17/03/2016 07:07
- Part 7: For the preceding part double click ID:nRSQ3559Sf
counterparty bank at 31 December, based on Moody's long term ratings:
2015 2014
Group £000 £000
Aa3 34,459 81,898
A2 - 20,000
Baa1 1,607 1,607
36,066 103,505
20. Loans and advances to customers
2015 2014
Group £000 £000
Gross loans and advances 1,615,208 1,197,394
Less: allowances for impairment on loans and advances (note 21) (35,696) (38,411)
1,579,512 1,158,983
On 18 December 2014 AL completed the purchase of a residential mortgage portfolio acquired from the administrators of the
Dunfermline Building Society ("DBS") for a consideration of £106.3m. The portfolio is included in loans and advances to
customers at fair value. The portfolio has performed according to our expectations and at 31 December 2015 had a remaining
balance of £95.1m.
For a maturity profile of loans and advances to customers, refer to note 6.
Loans and advances to customers include finance lease receivables as follows:
2015 2014
Group £000 £000
Gross investment in finance lease receivables:
- No later than 1 year 41,906 18,262
- Later than 1 year and no later than 5 years 67,789 13,047
- Later than 5 years 873 -
110,568 31,309
Unearned future finance income on finance leases (18,996) (5,799)
Net investment in finance leases 91,572 25,510
The net investment in finance leases may be analysed as follows:
- No later than 1 year 31,684 13,729
- Later than 1 year and no later than 5 years 59,074 11,781
- Later than 5 years 814 -
91,572 25,510
Loans and advances to customers can be further summarised as follows:
2015 2014
Group £000 £000
Neither past due nor impaired 1,516,236 1,082,580
Past due but not impaired 23,792 23,175
Impaired 75,180 91,639
Gross 1,615,208 1,197,394
Less: allowance for impairment (35,696) (38,411)
Net 1,579,512 1,158,983
(a) Loans and advances past due but not impaired
Gross amounts of loans and advances to customers that were past due but not impaired were as follows:
2015 2014
Group £000 £000
Past due up to 30 days 643 4,763
Past due 30 - 60 days 1,714 1,145
Past due 60 - 90 days 1,706 1,233
Over 90 days 19,729 16,034
Total 23,792 23,175
Loans and advances typically fall into this category when there is a delay in either the sale of the underlying collateral
or the completion of formalities to extend the credit facilities for a further period. Management have no material concerns
regarding the quality of the collateral that secures the lending.
(b) Loans and advances renegotiated
Restructuring activities include external payment arrangements, modification and deferral of payments. Following
restructuring, a previously overdue customer account is reset to a normal status and managed together with other similar
accounts. Restructuring policies and practices are based on indicators or criteria which, in the judgement of management,
indicate that payment will most likely continue. These policies are kept under continuous review. Renegotiated loans that
would otherwise be past due or impaired totalled £nil (2014: £nil).
(c) Collateral held
Collateral is measured at fair value less costs to sell.
Arbuthnot Latham & Co., Ltd
Most of the loans are secured by property with an average LTV of 46% (2014: 43%). The fair value of the collateral held
against past due but not impaired or impaired balances is £93.3m (2014: £89.5m) against loans of £43.2m (2014: £40.1m),
giving an average loan-to-value of 46% (2014: 45%). The weighted average loan-to-value is 63% (2014: 57%). The net amount
of individually impaired loans and advances to customers after impairment but before taking into account the cash flows
from collateral held is £18.0m (2014: £12.8m).
Secure Trust Bank PLC
The majority of the loans are unsecured personal loans with an average size at inception of £5,000; therefore the portfolio
does not have a significant concentration to any individuals, sectors or geographic locations. £0.2m (2014: £0.2m) relates
to a standard mortgage loan secured upon residential property and this is neither past due nor impaired. The residential
property over which the mortgage loan is secured has a fair value of £0.2m based on other recent property sales, and a loan
to value ratio of 72% (2014: 76%).
£368.0m (2014: £133.7m) of the loans are secured upon residential or commercial property and these are neither past due nor
impaired. All loans secured are at a loan to value ratio of less than 80%.
£165.7m (2014: £137.9m) of the loans are secured against motor vehicles where the security is discharged when the buyer
exercises an option to buy the goods at a predetermined price at the end of the loan term. Management's estimate of the
fair value of the motor vehicles was £127.1m (2014: £109.5m).
21. Allowances for impairment of loans and advances
Reconciliation of specific allowance for impairments:
2015 2014
Group £000 £000
At 1 January 38,411 31,033
Adjustments for disposals (5,812) -
Impairment losses 26,654 18,669
Loans written off during the year as uncollectible (23,590) (11,003)
Amounts recovered during the year 33 (288)
At 31 December 35,696 38,411
Reconciliation of collective allowance for impairments:
2015 2014
Group £000 £000
At 1 January 2,031 1,578
Impairment losses 1,110 453
At 31 December 3,141 2,031
A further analysis of allowances for impairment of loans and advances is as follows:
2015 2014
Group £000 £000
Loans and advances to customers - UK Private Bank 1,411 4,355
Loan and advances to customers - Retail Bank 34,285 34,056
At 31 December 35,696 38,411
22. Other assets
2015 2014
Group £000 £000
Trade receivables 2,625 5,522
Repossessed collateral - held as inventory 5,226 3,742
Prepayments and accrued income 9,043 7,602
16,894 16,866
Land acquired through repossession of collateral which is subsequently held in the ordinary course of business with a view
to develop and sell is accounted for as inventory.
2015 2014
Company £000 £000
Trade receivables 732 732
Due from subsidiary undertakings 159 4,633
Prepayments and accrued income 100 107
991 5,472
23. Financial investments
2015 2014
Group £000 £000
Financial investments comprise:
- Securities (at fair value through profit and loss) 112 145
- Securities (available-for-sale) 2,573 1,132
Total financial investments 2,685 1,277
Debt securities
The Group has made equity investments in unlisted special purpose vehicles set up to acquire and enhance the value of
commercial properties. These investments are of a medium term nature. There is no open market for these investments and
therefore the Group has valued them using appropriate valuation methodologies, which include net asset valuations and
discounted future cash flows. The Directors intend to dispose of these assets when a suitable buyer has been identified and
when the Directors believe that the underlying assets have reached their maximum value.
Unlisted securities
Arbuthnot Latham & Co., Ltd holds an equity interest in Visa Europe. Following the public announcement on 2 November 2015
of the proposed sale of Visa Europe to Visa Inc., management has assessed the fair value of Group's investment as £1.3m.
The valuation determined by management includes a haircut on the preference share element of the consideration, as referred
to in Note 4.9.
2015 2014
Company £000 £000
Financial investments comprise:
- Securities (at fair value through profit and loss) 112 145
- Securities (available-for-sale) 13 13
Total financial investments 125 158
24. Deferred taxation
The deferred tax asset comprises:
2015 2014
Group £000 £000
Unrealised surplus on revaluation of freehold property 196 180
Accelerated capital allowances and other short-term timing differences 1,100 215
Tax losses 891 2,193
Transfer to assets classified as held for sale (403) -
Deferred tax asset 1,784 2,588
At 1 January 2,588 2,855
On acquisition of V12/ELL - 282
Available-for-sale securities (262) -
Profit and loss account - accelerated capital allowances and other short-term timing differences 673 (549)
Profit and loss account - tax losses (812) -
Transfer to assets classified as held for sale (403) -
Deferred tax asset at 31 December 1,784 2,588
2015 2014
Company £000 £000
Accelerated capital allowances and other short-term timing differences 418 406
Deferred tax asset 418 406
At 1 January 406 441
Profit and loss account - accelerated capital allowances and other short-term timing differences 12 (35)
Deferred tax asset at 31 December 418 406
Deferred tax assets are recognised for tax losses to the extent that the realisation of the related tax benefit through
future taxable profits is probable.
The UK corporation tax rate reduced from 23% to 21% with effect from 1 April 2014 and to 20% with effect from 1 April 2015.
On 26 October 2015 the Government substantively enacted a further reduction to the UK corporation tax rate to 19% from 1
April 2017 and to 18% from 1 April 2020. In addition, the Chancellor announced the introduction of a corporation tax
surcharge applicable to banking companies with effect from 1 January 2016. The surcharge will be levied at a rate of 8% on
the profits of banking companies, after taking into account an annual allowance of £25m. This will increase the Group's
future current tax charge accordingly.
25. Investment in associate
2015 2014
Group £000 £000
Investment in associate 943 943
On 11 October 2013, Arbuthnot Latham & Co., Ltd together with Praxis (Holding) Limited, formed a special purpose vehicle in
the form of a separate legal entity (Tarn Crag Limited). The purpose of this legal entity is to refurbish and re-let a
property in Glasgow, with the intention to exit via a sale to an institutional investor in circa 5 years time. The
investment is accounted for using the equity method.
During the year the associate recorded a loss of £331k. Due to the fact that the value of the outstanding loan notes
(including accrued interest) exceeded the investment in associate, no loss has been recorded at Group level and the
carrying value was left at cost. The summarised Statement of Financial Position of the associate is set out below:
2015 2014
At 31 December £000 £000
ASSETS
Cash and balances at central banks 2,236 1,724
Other assets 1,010 8
Property, plant and equipment 15,412 10,416
18,658 12,148
EQUITY AND LIABILITIES
Deposits from banks 12,014 9,970
Other liabilities 667 865
Debt securities in issue 1,400 1,400
Revaluation reserve 4,995 -
Retained Earnings (418) (87)
18,658 12,148
(a) Significant restrictions
Praxis (Holding) Ltd receives £0.1m per annum in its capacity as property manager. Arbuthnot Latham & Co., Ltd subscribed
to £0.9m of loan notes and Praxis (Holding) Ltd subscribed to £0.5m of loan notes, which carry interest at 15% and is
rolled up and payable on redemption. The bank debt and interest and the loan notes and interest thereon as well as the
property management fees need to be repaid, before further distributions to shareholders can take place.
(b) Risks associated with interests
Arbuthnot Latham & Co., Ltd agreed to subscribe to a further £0.2m of loan notes when required to fund working capital.
26. Intangible assets
Goodwill Computer software Other intangibles Total
Group £000 £000 £000 £000
Cost
At 1 January 2014 2,695 10,094 7,529 20,318
Additions - 1,214 - 1,214
Disposals - (1,838) - (1,838)
At 31 December 2014 2,695 9,470 7,529 19,694
Additions - 3,532 - 3,532
Transfer to assets classified as held for sale - (349) (5,115) (5,464)
At 31 December 2015 2,695 12,653 2,414 17,762
Accumulated amortisation
At 1 January 2014 - (5,024) (2,191) (7,215)
Amortisation charge - (1,482) (1,517) (2,999)
Disposals - 1,838 - 1,838
At 31 December 2014 - (4,668) (3,708) (8,376)
Amortisation charge - (1,627) (1,167) (2,794)
Transfer to assets classified as held for sale - 247 4,035 4,282
At 31 December 2015 - (6,048) (840) (6,888)
Net book amount
At 31 December 2014 2,695 4,802 3,821 11,318
At 31 December 2015 2,695 6,605 1,574 10,874
Included within 2015 Computer Software additions is an amount of £903,000 which relates to intangible assets in the course
of construction which management has assessed to not be available for use as at 31 December 2015 and are therefore not
being amortised.
Computer software
Company £000
Cost
Additions 40
At 31 December 2014 40
At 31 December 2015 40
Accumulated amortisation
At 1 January 2014 (28)
Amortisation charge (8)
At 31 December 2014 (36)
Amortisation charge (4)
At 31 December 2015 (40)
Net book amount
At 31 December 2014 4
At 31 December 2015 -
Refer to note 4.2 for assumptions used in the impairment review of goodwill.
27. Property, plant and equipment
Freehold land and buildings Leasehold improvements Computer and other equipment Motor Vehicles Total
Group £000 £000 £000 £000
Cost or valuation
At 1 January 2014 4,850 628 12,033 - 17,511
Additions 2,638 2,926 2,239 7,803
Disposals - - (541) (541)
At 31 December 2014 7,488 3,554 13,731 - 24,773
Additions - 1,722 1,576 97 3,395
Disposals - - (2,417) - (2,417)
Transfer to assets classified as held for sale - (590) (447) - (1,037)
At 31 December 2015 7,488 4,686 12,443 97 24,714
Accumulated depreciation
At 1 January 2014 (840) (247) (10,902) - (11,989)
Depreciation charge (89) (234) (485) - (808)
Disposals - - 499 - 499
At 31 December 2014 (929) (481) (10,888) - (12,298)
Depreciation charge (108) (399) (891) (22) (1,420)
Disposals - - 2,419 - 2,419
Transfer to assets classified as held for sale - 350 239 - 589
At 31 December 2015 (1,037) (530) (9,121) (22) (10,710)
Net book amount
At 31 December 2014 6,559 3,073 2,843 - 12,475
At 31 December 2015 6,451 4,156 3,322 75 14,004
The Group's opening freehold property is the Registered Office of Secure Trust Bank and is fully utilised for the Group's
own purposes. In 2014, Secure Trust Bank acquired a further freehold property, Secure Trust House, Boston Drive, Bourne End
SL8 5YS. The majority of this property is used for the Group's own purposes. However, the legacy tenant of the property has
remained in situ. The cost of the property was £2.7m.
The directors have assessed the value of the Group's freehold property at the year end through comparison to current rental
yields on similar properties in the same area and do not believe that the fair value of freehold property is materially
different from its carrying value.
The carrying value of freehold land not depreciated is £1.7m (2014: £1.7m). The historical cost of freehold property
included at valuation is as follows:
2015 2014
Group £000 £000
Cost 7,628 7,470
Accumulated depreciation (1,305) (1,153)
Net book amount 6,323 6,317
Computer and other equipment Motor Vehicles Total
Company £000 £000 £000
Cost or valuation
At 1 January 2014 203 203
Additions 1 1
At 31 December 2014 204 - 204
Additions 5 97 102
At 31 December 2015 209 97 306
Accumulated depreciation
At 1 January 2014 (73) (73)
Depreciation charge (4) (4)
At 31 December 2014 (77) - (77)
Depreciation charge (3) (22) (25)
At 31 December 2015 (80) (22) (102)
Net book amount
At 31 December 2014 127 - 127
At 31 December 2015 129 75 204
28. Deposits from banks
2015 2014
Group £000 £000
Deposits from other banks 55,305 27,657
For a maturity profile of deposits from banks, refer to Note 6.
29. Deposits from customers
2015 2014
Group £000 £000
Current/demand accounts 499,022 354,095
Notice accounts 579,877 295,347
Term deposits 850,939 544,843
1,929,838 1,194,285
Included in customer accounts are deposits of £4,195,000 (2014: £9,947,000) held as collateral for loans and advances. The
fair value of these deposits approximates the carrying value.
For a maturity profile of deposits from customers, refer to Note 6.
30. Other liabilities
2015 2014
Group £000 £000
Trade payables 14,581 12,024
Accruals and deferred income 17,396 22,960
31,977 34,984
Within trade payables at 31 December 2015 there is £3.7m (2014: £4.3m) collateral held from RentSmart. STB buys assets
which are then leased to customers of RentSmart and STB pays RentSmart a commission, which is recognised within operating
income. In return, RentSmart continues to operate the agreement, retains the credit risk and provides STB with a
collateral amount that is based upon the balance of customer receivables and expected new agreements during the following
month.
Within accruals and deferred income there is £nil relating to accrued interest payable (2014: £6.6m).
Financial Ombudsman Scheme accrual
Accruals include a provision for outstanding potential PPI claims of £2.6m as at 31 December 2015 (2014: £2.0m). The
increase in provision is a result of new claims emerging following an extension of the deadline for making claims. During
2015 £1.5m of PPI provisions were utilised (2014: £0.3m).
The FCA is currently consulting on a proposed deadline for making PPI claims. The ruling is expected to come into force in
Spring 2016 with a deadline of 2 years from the ruling, which would give consumers until Spring 2018 to make a claim.
Financial Services Compensation Scheme Levy
In common with all regulated UK deposit takers, AL and STB pay levies to the Financial Services Compensation Scheme
("FSCS") to enable the FSCS to meet claims against them. The FSCS levy consists of two parts: a management expenses levy
and a more significant compensation levy. The management expenses levy covers the costs of running the scheme and the
compensation levy covers the amount of compensation and associated interest the scheme pays, net of any recoveries it makes
using the rights that have been assigned to it.
The Group's FSCS provision reflects market participation up to the reporting date and the accrual of £0.3m (2014: £0.3m)
relates to the interest levy for the scheme year 2015/16 which is payable in September 2016. This amount was calculated on
the basis of the Group's share of protected deposits and the FSCS's estimate of total interest levies payable for each
scheme year. The loan repayment relating to the scheme year 2015/16 was paid by the Group in September 2015.
Company £000 £000
Due to subsidiary undertakings 3,068 3,028
Accruals and deferred income 1,167 1,104
4,235 4,132
31. Debt securities in issue
2015 2014
Group and Company £000 £000
Subordinated loan notes 10,834 11,448
The subordinated loan notes were issued on 7 November 2005 and are denominated in Euros. The principal amount outstanding
at 31 December 2015 was E15,000,000 (2014: E15,000,000). The notes carry interest at 3% over the interbank rate for three
month deposits in euros and are repayable at par in August 2035 unless redeemed or repurchased earlier by the Company.
The contractual undiscounted amount that will be required to be paid at maturity of the above debt securities is
E15,000,000.
Given the fact that the Group has never been subject to a published credit rating by any of the relevant agencies and the
notes in issue are not quoted, it is not considered possible to approximate a fair value for these notes.
32. Contingent liabilities and commitments
Contingent liabilities
The Group is subject to extensive regulation in the conduct of its business. A failure to comply with applicable
regulations could result in regulatory investigations, fines and restrictions on some of the Group's business activities or
other sanctions. The Group seeks to minimise this risk through the adoption of compliance and other policies and
procedures, continuing to refine controls over business practices and behaviour, employee training, the use of appropriate
documentation, and the involvement of outside legal counsel where appropriate.
Capital commitments
At 31 December 2015, the Group had capital commitments of £nil (2014: £nil) in respect of equipment purchases.
Credit commitments
The contractual amounts of the Group's off-balance sheet financial instruments that commit it to extend credit to customers
are as follows:
2015 2014
Group £000 £000
Guarantees and other contingent liabilities 56 714
Commitments to extend credit:
- Original term to maturity of one year or less 178,863 139,423
178,919 140,137
Operating lease commitments
Where a Group company is the lessee, the future aggregate lease payments under non-cancellable operating leases are as follows:
2015 2014
Group £000 £000
Expiring:
Within 1 year 3,710 3,766
Later than 1 year and no later than 5 years 9,974 8,715
Later than 5 years 7,790 8,876
21,474 21,357
In 2013, Arbuthnot Latham & Co., Ltd entered into a 16 year lease on 7 Wilson Street (the head office for Arbuthnot Banking
Group PLC, the principal location for Arbuthnot Latham & Co., Ltd and London offices for Secure Trust Bank PLC), with a
break at 11 years and rent reviews after 5, 10 and 15 years. The initial rent is £1.75 million per annum. This lease forms
the most significant part of the operating leases disclosed in the table above.
33. Share capital
Number of shares Ordinary share capital Share premium
Group and Company £000 £000
At 1 January 2014 15,279,322 153 -
At 31 December 2014 & December 2015 15,279,322 153 -
The Ordinary shares have a par value of 1p per share (2014: 1p per share). At 31 December 2015 the Company held 390,274
shares (2014: 390,274) in treasury.
34. Reserves and retained earnings
2015 2014
Group £000 £000
Revaluation reserve 98 98
Capital redemption reserve 20 20
Available-for-sale reserve 1,047 (250)
Treasury shares (1,131) (1,131)
Retained earnings 123,330 114,641
Total reserves at 31 December 123,364 113,378
The revaluation reserve represents the unrealised change in the fair value of properties.
The capital redemption reserve represents a reserve created after the Company purchased its own shares which resulted in a
reduction of share capital.
2015 2014
Company £000 £000
Capital redemption reserve 20 20
Treasury shares (1,131) (1,131)
Retained earnings 46,537 50,755
Total reserves as 31 December 45,426 49,644
35. Share-based payment options
Company
The Company had the following equity settled share-based payment awards outstanding at 31 December 2015:
• On 16 April 2013 Mr. Salmon was granted an option to subscribe for 100,000 ordinary 1p shares in the Company between
April
2016 and April 2021 at 930p. The fair value of the option at grant date was £83,000.
• On 16 April 2013 Mr. Cobb was granted an option to subscribe for 50,000 ordinary 1p shares in the Company between April
2016 and April 2021 at 930p. The fair value of the option at grant date was £41,000.
• On 1 April 2014 Mr Fleming was granted an option to subscribe for 50,000 ordinary 1p shares in the Company between April
2017 and April 2022 at 1185p. The fair value of these shares at grant date was £53,000.
There are no other vesting conditions for these awards. No share options were granted, forfeited, exercised or expired
during the year. ABG incurred an expense in relation to share based payments of £37,000 during 2015 (2014: £36,000), as
disclosed in Note 12.
Measurement inputs and assumptions used in the Black-Scholes model are as follows:
2015 2014
Expected Stock Price Volatility 17% 17%
Expected Dividend Yield 2.7% 2.7%
Rick Free Interest Rate 1.20% 1.20%
Average Expected Life (in years) 0.53 1.53
Group - equity settled
Apart from the share-based payment awards for the Company listed above, the Group also include awards allocated under the
Secure Trust Bank ("STB") Share Option Scheme, which was established on 17 October 2011 and entitles key management
personnel and senior employees of STB to purchase shares in that company.
The performance conditions of the Scheme are that for the duration of the vesting period, the dividends paid by STB must
have increased in percentage terms when compared to an assumed dividend of £8m in respect of the financial year ending 31
December 2012, by a minimum of the higher of the increase in the Retail Prices Index during that period or 5% per annum.
All dividends paid by STB each year during the vesting period must be paid from STB's earnings referable to that year.
Also from the grant date to the date the Option is exercised, there must be no public criticism by any regulatory authority
on the operation of STB or any of its subsidiaries which has a material impact on the business of STB.
Options are forfeited if they remain unexercised after a period of more than 10 years from the date of grant. If the
participant ceases to be employed by the Group by reason of injury, disability, ill-health or redundancy; or because his
employing company ceases to be a shareholder of the Group; or because his employing business is being transferred out of
the Group, his option may be exercised within 6 months after such cessation. In the event of the death of a participant,
the personal representatives of a participant may exercise an option, to the extent exercisable at the date of death,
within 6 months after the death of the participant.
On cessation of employment for any other reason (or when a participant serves, or has been served with, notice of
termination of such employment), the option will lapse although the Remuneration Committee has discretion to allow the
exercise of the option for a period not exceeding 6 months from the date of such cessation.
In such circumstances, the performance conditions may be modified or waived as the Remuneration Committee, acting fairly
and reasonably and taking due consideration of the circumstances, thinks fit. The number of Ordinary Shares which can be
acquired on exercise will be pro-rated on a time elapsed basis, unless the Remuneration Committee, acting fairly and
reasonably and taking due consideration of the circumstances, decides otherwise. In determining whether to exercise its
discretion in these respects, the Remuneration Committee must satisfy itself that the early exercise of an option does not
constitute a reward for failure.
On 2 November 2011 934,998 share options were granted at an exercise price of 720p per share. Approximately half of the
share options were exercisable on 2 November 2014 with the remainder being exercisable on 2 November 2016, being classed as
share option tranches SOS1 and SOS2 respectively. A total of 14,167 share options have been forfeited since their grant
date. At the grant date these share options had a fair value of £1.6m. Of the share options granted on 2 November 2011, the
following remaining share options (SOS2) were to Group directors:
· Mr. Lynam was granted an option to subscribe for 141,667 shares at 720p between 2 November 2016 and 1 November
2021.
· Mr. Salmon was granted an option to subscribe for 141,667 shares at 720p between 2 November 2016 and 1 November
2021.
The Share Option Scheme is an equity settled scheme. The original grant date valuation was determined to be £1.69 per
option and this valuation has been used in the calculation. An attrition rate of option holders has been assumed of nil
for the second tranche of share options. Due to the options being fully conditional knockout options, a probability of
pay-out has been assigned based on the likelihood of meeting the performance criteria, which is 95% for SOS2. STB incurred
an expense in relation to share based payments of £0.m during 2015 (2014: £1.5m), as disclosed in Note 12.
Summary details of the Secure Trust Bank Share Option Scheme are shown in the table below:
31 December 2015 31 December 2014
No. SOS2 No. SOS2
Key Management Personnel 3 318,751 3 318,751
Senior Management 5 141,668 5 141,668
Share Options in Issue 8 460,419 8 460,419
Exercise Price (£) 7.20 7.20
Value per option (£) 1.69 1.69
Total included in reserves (£000) 778 778
Probability of payout 100% 95%
Assumed value of share options on exercise date (£000) 739 739
Value of share options at 31 December (£000) 468 468
Measurement inputs and assumptions used in the Black-Scholes model are as follows:
2015 2014
Expected Stock Price Volatility 30% 30%
Expected Dividend Yield 6% 6%
Rick Free Interest Rate 0.86% 0.86%
Average Expected Life (in years) 0.9 1.9
Group - cash settled
On 16 March 2015, a four year "phantom" share option scheme was established in order to provide effective long-term
incentive to senior management of the Group. Under the scheme, no actual shares would be issued by STB, but those granted
awards under the scheme would be entitled to a cash payment. The amount of the award is calculated by reference to the
increase in the value of an ordinary share in STB over an initial value set at £25 per ordinary share, being the price at
which the shares resulting from the exercise of the first tranche of share options under the Share Option Scheme were sold
in November 2014.
As at 31 December 2015, 326,917 share options remained outstanding following the departure of one employee from the scheme.
An additional 14,000 share options should lapse following the expected departure of a further three employees following the
conditional sale of Everyday Loans Holdings Limited and its subsidiaries.
As at 31 December 2015, the estimated fair value has been prepared using the Black-Scholes model, which resulted in an
expense being recognised in relation to the phantom option scheme of £1.2m (2014: £nil). This has been included within
staff costs as disclosed in Note 12.
Measurement inputs and assumptions used in the Black-Scholes model are as follows:
2015
Expected Stock Price Volatility 27%
Expected Dividend Yield 2%
Rick Free Interest Rate 0.72%
Average Expected Life (in years) 2.85
36. Dividends per share
Final dividends are not accounted for until they have been approved at the Annual General Meeting. At the meeting on 5 May
2016, a dividend in respect of 2015 of 17p per share (2014: actual dividend 16p per share) amounting to a total of £2.53m
(2014: actual £2.38m) is to be proposed. The financial statements for the year ended 31 December 2015 do not reflect the
final dividend which will be accounted for in shareholders' equity as an appropriation of retained profits in the year
ending 31 December 2016.
37. Cash and cash equivalents
For the purposes of the Statement of Cash Flows, cash and cash equivalents are comprised of the following balances with
less than three months maturity from the date of acquisition.
2015 2014
Group £000 £000
Cash and balances at central banks (Note 16) 368,611 115,938
Loans and advances to banks (Note 17) 28,578 31,844
397,189 147,782
2015 2014
Company £000 £000
Due from subsidiary undertakings - bank balances 12,444 19,244
38. Related party transactions
Related parties of the Company and Group include subsidiaries, Key Management Personnel, close family members of Key
Management Personnel and entities which are controlled, jointly controlled or significantly influenced, or for which
significant voting power is held, by Key Management Personnel or their close family members.
Other than the directors' remuneration (see Remuneration Report pages 22 to 23), payment of dividends and transactions with
subsidiaries, there were no related party transactions within the Parent Company. A number of banking transactions are
entered into with related parties in the normal course of business on normal commercial terms. These include loans and
deposits. Except for the directors' disclosures, there were no other Key Management Personnel disclosures; therefore the
tables below relate to directors.
2015 2014
Group £000 £000
Loans
Loans outstanding at 1 January 5,503 5,188
Loans advanced during the year 726 1,083
Loan repayments during the year (3,106) (768)
Loans outstanding at 31 December 3,123 5,503
Interest income earned 143 255
The loans to directors are mainly secured on property, shares or cash and bear interest at rates linked to base rate. No
provisions have been recognised in respect of loans given to related parties (2014: £nil). Details of directors'
remuneration are given in the Remuneration Report. The Directors do not believe that any other key management disclosures
are required.
2015 2014
Group £000 £000
Deposits
Deposits at 1 January 2,665 2,522
Deposits placed during the year 2,721 3,531
Deposits repaid during the year (2,694) (3,388)
Deposits at 31 December 2,692 2,665
Interest expense on deposits 13 15
Details of principal subsidiaries are given in Note 39. Transactions and balances with subsidiaries are shown below:
2015 2014
Highest balance during the year Balance at 31 December Highest balance during the year Balance at 31 December
£000 £000 £000 £000
ASSETS
Due from subsidiary undertakings 23,454 12,603 34,808 23,877
Shares in subsidiary undertakings
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